Treasurer Wayne Swan has acknowledged it’s unlikely the Government will deliver the budget surplus it had been promising for next year.
“There has been a substantial hit to profits that Australian companies have experienced in the early months of this financial year,” Mr Swan told journalists in Canberra yesterday.
“What we’re seeing in our own numbers today means that $160 billion has been ripped from the budget bottom line over five years.”
The Treasurer argued that it was falling revenues rather than increased government spending that was hurting the budget outcome, adding that it would not be responsible for the government to continue to make up the revenue hole if it threatened growth or jobs.
The Conversation has collected reactions to this news from economic, business and political experts.
Sinclair Davidson
Sinclair Davidson, Professor of Institutional Economics at RMIT University
It was inevitable, mostly because this is a government that spends too much money. Every year they’ve been talking about cuts but these cuts have always been on future expenditure or proposed expenditure. They’ve never actually cut current expenditure.
I think the government has been right in trying to return to a budget surplus. It is good policy to have a budget in balance or surplus rather than deficit. Unfortunately they haven’t had the fiscal discipline to cut the spending they should have.
Dr George Argyrous
George Argyrous, Senior Lecturer at University of New South Wales
The attempt to achieve a surplus bought about its own undoing – as you try to achieve a surplus through austerity all you do is drive economic growth downwards, with the implication you’re more likely to get a deficit.
They’ve actually contributed to bringing about a deficit rather than achieving a surplus.What the government should do is just accept that occasionally governments go into deficit and that’s a normal way of coping with slowdowns in growth.
It’s like someone running up a hill – you have to breathe hard to get up the hill but you relax a bit when you’re coming down. The economy’s still running up a big hill.
John Wanna
John Wanna, Sir John Bunting Chair of Public Administration at Australian National University
I actually think it was worth the government aiming to bring a balanced budget in. That has been a big control on their spending, and I think that has been important.
Having now realised that they’re going to have to relax that commitment is probably pragmatic, and probably expected. But I think having that target was important: because when governments don’t have targets, it makes them flail around a lot more.
Tim Battin
Tim Battin, Senior Lecturer, Political and International Studies, School of Humanities, at the University of New England
The surplus admission from Wayne Swan is not surprising. But what is remarkable is the way in which he got himself cornered in trying to achieve a surplus, when international conditions didn’t favour a budget going to surplus. It wouldn’t have been good policy to try and persevere when the conditions didn’t warrant it.
I think the taxation debate is a healthy debate to have — to discuss our revenue requirements. One possibility is that unless some people seize an initiative and look at the way in which our revenue is inadequate — that is, our tax is too low — the initiative will certainly be taken up by others who will argue that we need to increase direct taxation.
Nick Economou
Nick Economou, Senior Lecturer, School of Political and Social Inquiry at Monash University
This announcement is a reality check about a number things. It’s a reality check about the state of the Australian economy. But it’s also a reality check about any idea that the government might have been going to a March election.
It looks like the strategy now will be to say to the community: look, in the interest of realism we have to abandon this silly idea of a surplus. It’s probably the wise thing to do – most responsible economists would agree.But will this damage them electorally? It seems to me that they’re already damaged anyway. They could make a virtue out of being seen to be pragmatic. Say to the voters: we had this promise of the surplus but the economic situation now doesn’t warrant it, we’re responding to what’s going on. The opposition will criticise them no matter what they do.
Tony Abbott said: “You just can’t trust this Government to manage the economy and you just can’t trust this Government to tell the truth…. For three years, they’ve been boasting of this surplus. For three years they’ve been saying that this surplus was the badge of their economic credibility. Well, they don’t have it any more.”
A version of this article was originally published at The Conversation and has been republished with full permission. You can read the original article here.
Charis Palmer ran her own subscription media business for seven years before joining Australian Independent Business Media where she helped build and launch Technology Spectator. She later became editor of Business Spectator.
So… No surplus. Do you think it matters? Do you care if the Government actually delivers a surplus?
Top Comments
Unfortunately we are experience the end results of a growth economy based on finite resources. Add globalization to the mix, and all ends like a pile of dominoes. Australia is just a localized point that relies on - and is affected by - the economies of the other countries in the world who trade with it.
While we have had crises and recessions before, this time it is different because our global economy has never been so tightly interconnected before. The 'global financial masters' have been putting band-aides on the leak holes of the entire global system for a few years now, but the whole system is about to come down.
Wayne Swann's comment is no surprise to me. I was more surprised at his original forecast of putting the country into surplus.
One needs to realize that the growth economy that created the middle class and the luxury we are now used to has only been around for the past 150 years. And throughout this time, in our haste to profit faster than our neighbour, we have done more destruction to the planet than in the entirety of its existence beforehand. Even if we could afford to continue in a fast growth economy, the planet cannot.
A pressing question is, what will we do once the localized governments go bankrupt? such as Spain, for example, and what is about to be unleashed in the USA.
Ultimately there is a way that works, and that is to create caring communities that help one another. and these communities helping other communities, creating a global network of care.
It starts with a change in our attitude toward one another. Perhaps we can look at ways to start to foster this sort of mentality in our general society.
Well lets hope they don't resort to the Howard years and sell everything that isn't nailed down. That's been a complete stuff up and the money certainly wasn't put back into Australia's infrastructure, health or education. Thankfully some of it was there for the stimulus packages that protected us from the horrors that beset the rest of the world. The only countries making headway out of that tragedy are the ones that went heavy on the stimulus and dealt harshly with those that should have known better. Taxation revenue will be down due to the large number of foreign investors in our companies and our land. As if they are going to pay taxes here, what a joke. Sell it and it is gone and so are all the benefits and revenues and this government seems to think it all okay as well. Shallow, greedy short sighted madness!